1. Field of the Invention
The invention relates to data processing apparatus and methods, and more particular to processing data relating to an index that has a plurality of constituents.
2. Description of the Related Art
Indices which are built from a number of index constituents are well known in the art. Generally, in economics and finance, an index (for example a price index or stock market index) is a benchmark of activity, performance or any evolution in general.
When investigating an index, one can measure which of the index constituents' returns move up or down. Another, more sophisticated measure is the index correlation. Correlation is a numeric measure of the strength of the linear relationship between two or more variables. In the context of portfolios and indices, correlation measures the degree of diversification of a given portfolio or index. If correlation is high, then the index is relatively less diversified. In this case the index constituents' returns move in the same direction. On the other hand, if correlation is low, then the index is relatively more diversified. This means that the index constituents' returns move in opposite directions.
However, correlation measurements usually require complex calculations to be performed based on economic models. This is particularly the case where the calculations are not only based on historical data but try to calculate implied correlation values. This is computationally very extensive and is therefore often not suitable to do in real-time systems.